Tax crackdown targets big firms

Georgia Wilkins, Noel Towell and Ben Butler

The ATO has announced a crackdown on 'corporate tax erosion'. Photo: Louie Douvis

An Australian Tax Office crackdown on ''corporate tax erosion'' has revealed that at least three major multinational technology companies are paying ''very low or no taxation'' in Australia.

Tax audits of the three high-tech companies could see them hit with large tax bills.

The Tax Office is targeting large companies shifting local profits overseas to minimise tax, costing billions of dollars in lost revenue.

At the same time the Tax Office has announced the formation of a giant fraud-busting unit of 2200 public servants designed to intimidate large-scale local tax avoiders.

Advertisement

Deputy Taxation Commissioner Greg Williams says the new division will seek to change the behaviour of companies and individuals through high-profile tax busts.

The unit will work with police, the Immigration Department and welfare agencies to step up operations against complex rackets such as those run by some labour hire firms supplying undocumented foreign workers.

Deputy Commissioner Mark Konza, heading the taskforce set up to investigate corporate tax erosion, said the Tax Office was reviewing eight ''major players'' in the digital economy, three of which were under ''active'' audit.

He said the audits, which began last year, involved interviewing staff to determine ''what is actually going on on the ground'' and had revealed structures that resulted in entities paying ''very low or no taxation'' in Australia.

Technology companies including Apple and Google have been under scrutiny both in Australia and overseas over their tax affairs.

The investigation into corporate tax erosion by large foreign companies was already progressing well, Mr Konza said. ''We do have several digital economy companies under audit at the moment and we are getting a much better understanding of how they operate and what the potential tax implications are.

''We are finding that there are elaborate structures being put in place and we are finding that we believe there is some profit shifting that is occurring out of Australia.''

The Tax Office is not allowed to name individual taxpayers but Mr Konza said all were based overseas with substantial presence in Australia.

Google Australia's most recent accounts show its tax bill increased from $74,000 in 2011 to $4.2 million in 2012, an effective tax rate of 15.8 per cent, rather than the headline tax rate of 30 per cent.

Last month, Fairfax Media revealed that Apple had shifted an estimated $8.9 billion in untaxed profits from its Australian operations to a tax haven structure in Ireland in the past decade.

Google and Apple representatives declined to comment.

Mr Konza stressed that the Tax Office was scrutinising companies over illegitimate profit shifting, not routine payments to parent companies.

''There will always be a lot of profit going back to the parent of these companies legitimately, but we are seeing that there is a margin of profit shifting that concerns us as well.''

He said the three companies would be receiving position papers from the Tax Office in the next few months, allowing them to dispute the claims.

The audits are part of multilateral efforts to uncover lost tax revenue through information exchanges with other jurisdictions, which begun when the taskforce was launched last July.

They come as the OECD warns that it is ''on track'' with its plan to overhaul global tax rules to tackle corporate profit shifting.

The new operation into large-scale local tax avoiders will bring together three major Tax Office anti-evasion units: Serious Non-Compliance, Aggressive Tax Planning, and Private Groups and High-wealth Individuals - the outfit behind the Wickenby operation against actor Paul Hogan and other high-flyers.

Mr Williams, the Tax Office's Serious-Non-Compliance head, said he now wanted his troops carrying out investigations "that people will pick up in the media, that from an industry point of view will touch a chord with people, that will have multiple agency tentacles so you can get a whole-of-Commonwealth approach".

"It's not rocket science. The more you work closely with other people on things that are joint, the opportunities just present themselves like you would never have seen them before," he said.

Mr Williams said cases would not be high priority unless they were going to change behaviour in broad industry sectors or among wealthy individuals.

"It's a whole raft of strategies, from marketing and communication, through to working with partner agencies [and] criminal investigations," he said.

52 comments

why chase the big guys,the average joe blow is the one they always target but alas his pockets are empty now

Commenter

thedreamer122

Location

melbourne

Date and time

April 05, 2014, 7:43AM

This is complete unsubstantiated rubbish. I haven't seen an average joe income earner audited in over ten years of practice, why? Because an audit by the tax office is going to cost more than any additional tax they may recover.

Try to deal in reality rather than boring cliched whinges.

Commenter

Craig

Location

Collingwood

Date and time

April 05, 2014, 12:10PM

It is really the small business folks pulling more shonky tax dodges than big business, which is subject to more governance and audits. Every small business owners I know avoids tax, even claiming smokes and alcohol as an expense. Having worked as an accountant, I came across many small business folks whose only instruction was "make my expenses equal my income" . I had smash repairs and scaffolders earning a gross of millions, but getting net income to almost nothing. One guys asked me to claim $15k of escort services as "business consultant" while his non English speaking, computer illiterate mum was the book keeper. Another guy claimed a $200k home renovation as office supplies. Also had a cabinet maker claim a lease on a $80 k sea ray boat as "furniture truck"

Commenter

Matt

Location

Rockdale

Date and time

April 05, 2014, 2:32PM

The real story is why did the Rudd Gillard government allow this to go on, they knew five years ago that this was going on. Do any of these companies hire political lobbiests in Australia?

Commenter

brinken

Date and time

April 05, 2014, 8:29AM

Yes mate all companies like these have lobbyist doing their bidding for them. Even the Bankers Association does it for the banks on Credit cards fees and the next recent topic Superannuation ...in the interest of client being watered down by the Abbot a Government so disasters like Storm investment collapses can occur and a Banks and so call financial advisor can carry on dumping the public !

Commenter

Ozzie

Location

Melbourne

Date and time

April 05, 2014, 12:31PM

So this has only been happening for 5 years brinken?

Face it, most of it happened on Howard/Costello's watch.

This has been happening since the last Century.

It's about time Feds got onto it Duh..... I hope they get those retrospective Billions.

Commenter

Peter

Location

Melbourne

Date and time

April 05, 2014, 12:38PM

Rudd's gone. Labor's gone. The adults are in charge now, aren't they? DO you need to work out how to inflame arguments you have already won (at the polls) now? Is that really "the real story"?

Commenter

andye

Location

sydney

Date and time

April 05, 2014, 12:47PM

Sorry, but in reality this kind of behaviour by global giants has been going on for mny years. Its only now that the government are waking up to it and trying to curb it, as the companies got better at it. I have worked for a global giant and even attending some training on project financials they stop at revealing how certain aspects of internal billing/transfer is done. Its only for the very select few in the company to know how money gets channelled back to HQ from regional/subsidiary companies.

Commenter

Enlightened1

Date and time

April 05, 2014, 1:19PM

Brinken - cut the nonsensical bite at <insert opposite political party here> This has been going on for years, absolute years, under both sides of Government. Many examples of "off-shoring" under both sides......James Hardie to Ireland, Murdoch to USA, and many other examples of companies doing a lot of business in Australia but with corporate bases overseas.

I just wish people would look at the issues at hand, and how to fix them, rather than taking cheap shots at whichever party they can blame. BOTH sides have cut funding to the ATO, BOTH sides have taken offence / leaned / intervened when their mates' companies were being audited, BOTH sides have contributed to the ridiculous situation where Audits have to be so long winded and consultative to the point where they cost more than they raise.

Commenter

Dismayed

Location

Melbourne

Date and time

April 05, 2014, 1:23PM

Brinken,

The ATO tax audits started last year, under the ALP.

The Howard goverrnment had 11 years in government to do something.

The Howard government weakened political donations disclosure laws in 2006.

This created the environment for corruption - Australian Water Holdings and Liberal slush fund EightByFive are the subject of 2 back to back NSW ICAC corruption inquiries re illicit political donations.

Howard's brainless amendments also led to $70 million in political donations not being declared to the Australian Electoral Commission by both major parties.

When Joe Hockey was forced to back down when he correctly recommended cracking down on discretionary family trusts which are used to hide assets from creditors and employees, avoid capital gains tax, split income and avoid tax.